Califo ia Changed Online Charity — Are Nonprofits Prepared?

Change is on the horizon for Califo
ia-based charitable donors.

On Jan. 1, 2023, a new Califo
ia law will go into effect that aims to secure online gifts and change the way companies donate. Assembly Bill 488, which amends the Supervision of Trustees and Fundraisers for Charitable Purposes Act, brings the same accountability the state already has on charitable solicitations to the modern online world. The legislation targets how officials must report “behested payments,” or payments made at the suggestion or request of the public official for a legislative, governmental, or charitable purpose. The change is a byproduct of an investigation into how politicians use nonprofits for campaign contributions.

According to a CalMatters report, lobbyist groups raised nearly $3 million in 2019, mostly in secret. These findings led to regulations designed to bring transparency to online cause-related marketing.

Now, platforms like GoFundMe and Facebook (along with retailers soliciting charitable donations during checkout) will be subject to scrutiny from Califo
ia Atto
ey General Rob Bonta. In my opinion, this new law secures online contributions and helps nonprofits adjust for compliance and update their standard operating procedures for more successful operation and management. Overall, it should lead to more streamlined and transparent online donation processes.

Disrupting Digital Donations

When they debuted last decade, online crowdfunding platforms were a breath of fresh air. They provided a new avenue for organizations to raise money online using social media and digital marketing tactics. And with great success! For example, GoFundMe users have raised $15 billion since the platform's 2010 beginnings. Of course, bad actors can surface alongside any good deeds — GoFraudMe basically speaks for itself.

Unfortunately, the emergence of these ill-intentioned copycats has caused people to lose trust in charities. Nearly one-third of Americans and more than 60% of people globally distrust nonprofit groups' abilities to accomplish their missions. Califo
ia's law aims to relieve these issues in two significant ways.

First, the amendment would require businesses to more closely follow whether the online donation platform they're using is compliant. Furthermore, companies would also have to define their actions regarding online donations, which will avert illegal activity or misconceptions about their true charitable intent in the long term.

Finally, nonprofits would also need to apply more effort toward compliance. They must reassess how they deliver their messages and how donation spending is outlined and enforced. The more they can prove they are achieving, the more trust they can build with current and potential donors.

Attracting Digital Donations

Corporate giving is a win-win situation for all parties. The company gets tax deductions while improving the public image with customers and boosting employee morale. When your organization donates to worthy causes within the surrounding community, it strengthens community bonds and could even lead to a boost in business.

A marketing partnership with a retailer could be great exposure, and often a company will match customer and employee donations. But for nonprofits to attract these big-ticket donations withi
Califo
ia, they'll need to follow three fundamental steps to ensure compliance with the new regulations:

1. Learn the history.

Read through the fine print of AB488 to understand the strategic meaning behind this newly amended action and see how you can adjust your practice accordingly. Charitable fundraising platforms have different rules from a “platform charity” or a “recipient charitable organization,” for example.

Be sure you are following all amended rules related to required disclosures and ensure there is no confusion. The average consumer should fully understand what they're donating to and how their donation will be used. Of course, you'll need to speak with an atto
ey to get the best information about the situation.

2. Consult with counsel.

You should consult with a law firm or lawmaker to get a clarification on defining terms to gain an understanding before making any changes in your organization. Besides the links above to the law itself and an atto
ey's explanation, you should also be familiar with Bonta's guide for charities that outlines best practices for nonprofit fundraising in Califo
ia.

Once your questions have been answered, apply those findings to your philanthropic efforts and make sure they comport with the new legislation. Counsel specializing in nonprofit compliance can help you stay on top of any updates to AB488 and similar laws.

3. Stay educated.

Administrative costs can eat into a nonprofit's funds, and the Better Business Bureau recommends staying below a 35% overhead-to-contributions ratio. However, you can push that closer to 10% with the proper education and training, as the public expects at least a 24% ratio to be considered practical.

Look for training sessions and webinars focused on adapting to the amended law. It's critical that your team complete these to have updated training and reduce overhead as much as possible.

By following these steps, you will ensure your nonprofit is fully compliant and can accept any donations without fear. Not only that, but you'll optimize expenses and can better attract large endowments.